Advanced Search
MyIDEAS: Login to save this article or follow this journal

Microeconomic impacts of a state-funded farmer loan program

Contents:

Author Info

  • Glenn Pederson
  • Wonho Chung
  • Roelof Nel
Registered author(s):

    Abstract

    Purpose – The purpose of this paper is to determine if there are positive microeconomic effects from a state-funded loan participation program on farm productivity and investment behavior. Design/methodology/approach – The authors take the approach that access to credit solves a liquidity problem. If a credit constraint exists it results in a suboptimal allocation of resources and a reduction in farm output and profitability. A two-stage regression model approach is used to analyze farmer survey and loan application data. In the first stage, a probit regression model is used to identify the farmers who are likely to be credit rationed. In the second stage, switching regression models are used to observe the effect of credit rationing on farm productivity and on farm investment behavior. Findings – It is found that there are liquidity effects of credit constraints for a significant share of the beginning and low-resource farmers who participated in the state-funded farm loan program. After controlling for various farm and farmer characteristics, the estimated productivity and investment demand equations imply that a 1 percent increase in credit received by credit constrained farmers under the state program increased their gross income by about 0.49 percent, and their investments in depreciable assets by about 0.33 percent. Originality/value – This paper is the first to apply the switching regression model to a state-funded farm loan program for the purpose of evaluating the financial impacts on farmer participants.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.emeraldinsight.com/journals.htm?issn=0002-1466&volume=72&issue=1&articleid=17031368&show=abstract
    Download Restriction: Cannot be freely downloaded

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

    Volume (Year): 72 (2012)
    Issue (Month): 1 (March)
    Pages: 5-21

    as in new window
    Handle: RePEc:eme:afrpps:v:72:y:2011:i:1:p:5-21

    Contact details of provider:
    Web page: http://www.emeraldinsight.com

    Order Information:
    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
    Email:
    Web: http://www.emeraldinsight.com/afr.htm

    Related research

    Keywords: Agriculture; Credit constraint; Farm productivity; Farms; Government policy; Loans; Microeconomics; Real estate investment; State-funded loans; Switching regressions; United States of America;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. T. Jappelli & J-S Pischke & N.S. Souleles, 1995. "Testing for Liquidity Constraints in Euler Equations with Complementary Data Sources," Working papers 95-19, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. repec:fth:pennfi:69 is not listed on IDEAS
    3. Martin Petrick, 2004. "A microeconometric analysis of credit rationing in the Polish farm sector," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 31(1), pages 77-101, March.
    4. Charles A. Towe & Mitchell J. Morehart, 2009. "Credit Constraints: Their Existence, Determinants, and Implications for U.S. Farm and Nonfarm Sole Proprietorships," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 275-289.
    5. Ahearn, Mary Clare, 2009. "Beginning Farmers and Ranchers: Who Are They?," Amber Waves, United States Department of Agriculture, Economic Research Service, June.
    6. Ahearn, Mary Clare & Newton, Doris J., 2009. "Beginning Farmers and Ranchers," Economic Information Bulletin 58618, United States Department of Agriculture, Economic Research Service.
    7. Martin Petrick, 2005. "Empirical measurement of credit rationing in agriculture: a methodological survey," Agricultural Economics, International Association of Agricultural Economists, vol. 33(2), pages 191-203, 09.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:72:y:2011:i:1:p:5-21. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.